Kempner: Time for a nuclear apology from your power company

Sometimes, even rah-rah cheerleading isn’t enough to make a bad situation look good.

That’s a shame for Georgia Power, because the CEO of its parent has tried to make the company’s nuclear misadventure look like a puffy cloud on a pretty spring day.

The Obama Administration backed new federal loans for a nuclear project in Georgia.

Four years ago, when the project to expand nuclear power at Plant Vogtle was already more than a year and a half behind schedule, Southern Co. chief executive Tom Fanning declared that work was moving along in “spectacular fashion.” The company said no further delays were expected on the complex .

Last year, with delays and costs having grown dramatically, Fanning said work on the two new nuclear units was going “beautifully.”

“We think this is going to be, when you look back on it, one of the greatest mega projects in modern American industrial history,” he told CNBC.

The delays continue to grow. And now, unfortunately, the unfinished mega project has leapt into much more mega trouble. The main contractor on the project and the designer of its reactors just filed for bankruptcy protection.

Translation: Uh-oh.

Westinghouse, the financially wobbly subsidiary of Japan’s financially wobbly Toshiba, will likely try to get the bankruptcy court to dump at least some of its responsibilities on the project’s owners and perhaps abandon the project completely. At best, that will cause further construction delays at Vogtle (as well as at a similar nuclear project by Scana in South Carolina) and drive costs higher.

Every day of delay costs about $2 million just for Georgia Power’s share of the Vogtle project. That doesn’t count additional construction costs that Westinghouse could shove in our laps. That also doesn’t include costs to the project’s other owners that serve smaller utilities throughout the state.

Stuck with the fallout

Consumers will get stuck with the fallout because, well, Georgia Power generally doesn't volunteer to pick up the cost of its missteps, and the elected Georgia Public Service Commission has shown little willingness to make them, no matter what the law calls for.

We don’t know yet exactly what’s coming with a bankruptcy case, which will probably take many months.

Westinghouse could try abandon the project. That would fully dump Vogtle's completion on Georgia Power and other project owners – Oglethorpe Power (which serves 38 electric membership corporations including Jackson EMC and Coweta-Fayette EMC); the Municipal Electric Authority of Georgia (which serves 49 member communities including Norcross, Marietta, Newnan, Acworth, Lawrenceville, Buford, Cartersville, College Park, Covington, and Fairburn); and the city of Dalton.

Is it even feasible for the project owners to push forward without Westinghouse, which has been at the center of the project since its inception? Fanning has said the company could fill the void: “We are primed and ready to go.”

Would Georgia Power and the other owners — or the Georgia Public Service Commission — cancel or put on hold one or both of the new units, leaving billions of dollars of work unfinished? (Less than half the first unit’s nuclear island is built.)

It’s possible that the cost of dumping the project will now turn out to be lower than the cost of pushing forward. Georgia apparently has years of buffer before it’s expected to need additional power the Vogtle expansion would provide.

If the project pushes forward, scores of vendors and subcontractors might try to use the bankruptcy filing as a way to reopen terms of their obligations, pumping up costs.

When Georgia Power executives proposed the Vogtle expansion they assured us they could handle the complexity of building the nation’s first new-from-scratch nuclear energy reactor in 30 years.

They were wrong.

Politicians and regulators smoothed the way. The federal government agreed to a streamlined approval process and offered hundreds of millions of dollars in tax credits and billions of dollars in loan guarantees.

Passing along costs

Georgia legislators let Georgia Power pass along financing costs (and charges for profits) to customers years before the reactors were slated to go into action. Elected members of the Georgia Public Service Commission approved the project without a fixed cap on costs and without risk-sharing mechanisms that its staff recommended.

When the project was just a fledgling seven years ago, The Atlanta Journal-Constitution asked a basic question: Can Georgia Power contain costs of Plant Vogtle reactors?

One of the project’s critics wrote “no,” and gave their reasoning.

But Buzz Miller, who was then Georgia Power’s executive vice president of nuclear development, detailed why the company could hold costs down.

“Our goal,” Miller wrote in the AJC, “is to set the standard for excellence and execution by which all other new nuclear plants will be measured.”

As it turns out, this is not the project the nuclear industry will want to be measured by.

Georgia might yet come out of this mess with new, functioning nuclear reactors that last for decades producing energy without carbon emissions. The original Plant Vogtle construction was also a drawn-out mess. But even in that best-case scenario, the new units will certainly cost customers more than they should have.

(Be wary of how Georgia Power tries to compare its early predictions about impact on consumer bills and current rates. They are often comparing apples and orangutans.)

Running gargantuan and complicated projects with long lead times is immensely difficult. But it’s time for top brass at Georgia Power and Southern to acknowledge mistakes and apologize for missteps in managing an expansion now saddled with billions of dollars in overruns.

The time for pretty talk passed long ago.

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